The second Firestone recall in North America initiated by Ford Motor Co. in May hasn't created the ``flurry'' of customers rushing to have their tires replaced that characterized last year's recall.
Still, Goodyear, Michelin North America Inc. and, to a lesser extent, Cooper Tire & Rubber Co. said they increased market share in passenger and light truck tires during the first half of 2001.
Ford expects the 13 million tires it's replacing to be exchanged by the first quarter of 2002, according to tire makers. That time frame could be lessening any sense of urgency-or consumers are just stalling to get the most wear out of their original equipment tires, manufacturers and analysts said.
The outcome of the National Highway Traffic Safety Administration's dispute with Bridgestone/Firestone-NHTSA wants the company to enlarge its recall and the tire maker said it won't do it-could change consumer behavior, said Alison Heiser, vice president of marketing for Michelin Americas Small Tires. ``There's definitely a decision that could be made that could change the impact we're seeing today.''
The industry is seeing only marginal sales and share gains related to Ford's recall campaign. And they aren't enough to offset the aftermarket's 2-percent decline so far this year, Michelin said in its half-year earnings.
Current economic conditions and pull-ahead sales related to the first recall spiked tire sales last year, contributing to the market's decline, said Rod Lache, a tire analyst with Deutsche Bank Alex. Brown.
Bridgestone/Firestone's tire sales in North America dropped to $5.35 billion last year, enough to let Michelin, with $5.5 billion, squeeze by it to the No. 2.
But Bridgestone/Firestone's overall sales for 2000-even taking into account the negative effects of the first recall-were the same as 1999, a spokeswoman for the tire manufacturer said.
``The first half of the year (2000) was gang busters,'' she said. And then came the recall.
Michelin and Goodyear gained the bulk of replacement sales with the first recall and appear set to do so again. Cooper and Continental Tire North America Inc. have made smaller gains on Firestone's losses, but are stepping up their brand awareness campaigns.
``I'd call (all of) these gains semi-permanent,'' said Stephen Girsky, a tire analyst with Morgan Stanley Dean Witter Inc. in New York. ``It's very hard to get a customer back when you lose them.''
But Bridgestone/Firestone isn't giving up. Even though Firestone replacement sales fell 40 to 50 percent during the first half of this year compared with the very strong first six months of 2000, ``we don't believe the effects are permanent,'' the company spokeswoman said. ``Our goal is to make up for that.''
Competitors hoping to make additional gains at the expense of BFS may not see much materialize. The largest, incremental share gains were related to the first recall, Mr. Girsky said, and it will be hard to get the same impact with the second. There is a ``fair amount'' of confusion among consumers since Ford is the only one currently backing the second recall, he added.
Although it is unclear how much market share Firestone still has, if NHTSA made the second recall official it would represent another blow to the brand, Mr. Girsky said. But if that happens, Firestone would become part of the replacement program, shifting some near-term volume away from the other tire makers, he said.
Through July 25, Goodyear supplied 1.5 million of the more than 3 million tires Ford recalled so far this year, according to Mr. Girsky. The Akron-based company expects to supply about a million tires per month for the campaign in the third quarter and 50 percent of the total replacement demand.
Michelin said it has supplied 900,000 tires for the recall so far, with its sights set on providing about a third of the total 13 million.
In spite of the declining replacement market, Goodyear said it gained two points of consumer replacement market share during the second quarter and its shipments in the segment increased 10 percent compared with the industry average of 1 percent during the period. Goodyear-branded tires gained three points of consumer replacement market share during the second quarter, with shipments up 30 percent-or 20 percent without the recall sales factored in, he said. The recalls also have helped associated brand sales to rise, the Goodyear spokesman said.
Growth in Michelin- and BFGoodrich-brand sales explains most of Michelin's 1.5-point gain in aftermarket share during the first half, the French tire maker said in its consolidated earnings report.
Michelin's market share growth rate in the segment has been very steady over the past four years, Ms. Heiser said. The tire maker continues to benefit from consumers' flight to flag brands, with Michelin-brand sales up 12.8 percent this year over last year. Analysts estimate the Michelin brand, like Goodyear, gained three points of market share during the second quarter.
``At the end of the day, yes, we hope to sustain some of that (recall-related) business,'' Ms. Heiser said. However, ``the recall is the least important factor in (Michelin's) last four-years' growth.''
The term ``flight'' has been overstated a bit, she said, noting that although the recalls have accelerated it, Michelin has seen a trend toward flag brands for the past 10 years as consumers move to brands they recognize. In North America, Michelin reported 0.2-percent growth in passenger/light truck tires, as replacement sales grew 4.6 percent.
In the North American replacement market for sport-utility vehicle tires-a high-profit area-Michelin said it has a 27.8-percent market share, compared with a 24.5-percent share during the first half of 2000. To accomplish this gain, sales of Michelin group SUV tires grew at a pace twice that of the industry's 13-percent rise, including a 63.5-percent jump in demand for Michelin-branded SUV tires, according to company documents.
Although its share gains weren't as great, Cooper made advances in the consumer replacement market just the same. After suffering an 18-percent volume decline in the market during the first quarter-10 percent was the industry decline-Cooper increased net sales to $433 million during the second quarter. That reflected a nearly 6-percent increase in unit volume growth, which more than doubled that of the industry, the Findlay, Ohio-based tire maker said.
Cooper's light vehicle tire unit volumes increased by more than 3 percent during the quarter, while the North American replacement market as a whole grew by slightly more than 1 percent. Cooper-brand sales were up more than 20 percent during the quarter, and Mastercraft-brand sales increased nearly 30 percent, the company said.
``We certainly know that we've gained market share'' in the North American light vehicle replacement market, said Mark Armstrong, president of North American tire operations at Cooper. Since the company signed Arnold Palmer as a marketing spokesman in 1997, the Cooper brand has grown almost 4 1/2 times the industry rate, Mr. Armstrong's predecessor, John Fahl, said during a May interview. In 1993, 46 percent of all tires sold by the firm were Cooper brand; last year that number rose to 62 percent.
But sales of Cooper's private brands also are increasing, Mr. Armstrong said. Comments in the industry that there is a ``flight to quality'' going on are partially true, he said, ``but I think it's more of a flight to trust.'' Consumers are flocking to names they trust, and Cooper-affiliated brands are definitely among them, he said.
Continental Tire North America's consumer replacement market share was static during the year's first half, said Jim Mayfield, director of marketing.
The tire maker posted an overall second-quarter sales increase of 6.7 percent over last year, but took an operating loss of $47.7 million in the first half as it struggled to bring its inventory in line with lagging demand.
Although sales of Continental-brand tires have increased year over year, market share for the name is still very small, he said. To bolster additional consumer awareness for Conti as a premium brand, the company in June began a print advertising campaign in USA Today, to be followed soon by TV spots.
Within five years, the firm hopes to double market share for the Continental brand, Mr. Mayfield said.
``This is the first step; we are looking at some other avenues, as well, that could include racing events and sports sponsorships,'' he added.